02624cam a22002657 4500001000600000003000500006005001700011008004100028100002600069245012500095260006600220490004100286500001700327520146800344530006101812538007201873538003601945690009201981690007302073700002102146710004202167830007602209856003702285856003602322w8416NBER20180319112255.0180319s2001 mau||||fs|||| 000 0 eng d1 aLafontaine, Francine.10aTargeting Managerial Controlh[electronic resource]:bEvidence from Franchising /cFrancine Lafontaine, Kathryn L. Shaw. aCambridge, Mass.bNational Bureau of Economic Researchc2001.1 aNBER working paper seriesvno. w8416 aAugust 2001.3 aUsing an extensive longitudinal data set on franchising firms, we show that established franchisors manage their portfolio of company and franchised units to maintain a particular target level of corporate control and ownership of outlets. On average, established franchisors maintain about 15 percent of their outlets as company owned - with the other 85 percent owned by franchisees. Interestingly, the rate of company ownership does not rise or fall within firms as they gain experience or learn, or as they succeed or fail. However, the targeted rate does vary considerably across firms: firm-specific fixed effects explain 90 percent of the variance of company ownership rates in our longitudinal data. Given strong evidence that firms target specific, but different, rates of company ownership, what factors determine firms' optimal targeted rates? We find that brandname value is an important determinant: franchisors with high brandname value, as measured by advertising fees or major media expenditures, target high rates of company ownership. We argue that targeting high rates of company ownership is desirable in chains with more valuable brands because individual franchisees have incentives to free ride on brandname value. Consequently, high-value franchisors need to exert more direct managerial control over outlets in their chain. In addition, high company ownership rates give franchisors better incentives to maintain the value of their brand. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aL2 - Firm Objectives, Organization, and Behavior2Journal of Economic Literature class. 7aJ4 - Particular Labor Markets2Journal of Economic Literature class.1 aShaw, Kathryn L.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w8416.4 uhttp://www.nber.org/papers/w841641uhttp://dx.doi.org/10.3386/w8416